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The rapid growth in international reserves accumulation in many emerging Asian economies has challenged economists with a puzzle and has revitalised the reserves adequacy literature recently. Recent works mostly focus on a large group of countries in trying to explain such behaviour. However, this paper aims to assess reserves adequacy for Thailand in particular. We see that taking into account the catastrophic impact of the 1997 Asian financial crisis, the rapid development and worldwide integration of financial systems, the current high level of Thailand's reserves seems reasonable subject to some modifications in the traditional rules and theoretical approaches used in this paper to justify the reserves level in Thailand over the past decades. [ABSTRACT FROM AUTHOR]

Following an analysis of the forces behind the so-called "global capital flows paradox" observed in the era of advancing financial globalization, this paper sets out to investigate the opportunity costs of self-insurance through precautionary reserve holdings. We reject the idea of reserves as low-cost protection against the vagaries of global finance. And we also deny that arrangements giving rise to their rapid accumulation may be sustainable in the first place. Alternative policy options open to developing countries are explored, designed to limit both the risks of financial globalization and costs of insurance-type responses. We propose comprehensive capital account management as an alternative to full capital account liberalization. The aims of a permanent regulatory regime of capital controls, both with respect to the aggregate size and the composition of capital flows, are twofold. The first aim is to maintain sufficient macro policy space. The second aim is to assure a good micro fit of external expertise incorporated in FDI with a country's development strategy. [ABSTRACT FROM AUTHOR]